Savers: where to find the best rates now

It's been a miserable few years for savers. But new Bank of England governor Mark Carney has offered a glimmer of hope by scaling back the Funding for Lending Scheme (FLS).

Since its launch in 2012, savings rates have dropped by up to 1.5 percentage points. That's because banks and building societies have been able to access cheap finance to support mortgage lending, rather than compete for savers' funds.

According to Moneyfacts, the consumer website, best-buy instant-access rates have fallen to 1.6%, well below inflation.

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But now analysts reckon competition for deposits could pick up. Cash returns might even "double", says The Daily Telegraph. Yet this still means a pitiful return. An alternative is to invest but not everyone wants to risk their capital. So how can savers boost returns?

Let's assume you've used up this year's Isa allowance and shifted the rest of your cash to the best available instant-access account (if you haven't used your Isa allowance yet, the top variable-rate cash deal is 1.8% from the Post Office).

One option is regular saver accounts. These often offer rates of around 3%. However, higher returns are only available on small deposits of up to £250 or £500 a month, and often for just one year. The interest typically totals less than £100.

That may not sound worth it. But you can open a range of these with different providers, or even multiple accounts with the same provider. Teachers Building Society (non-teachers welcome) allows savers to open two of its 2.8% Charity Saver accounts and so save £1,000 a month.At the Principality Building Society, savers can have a Christmas Regular Saver Bond (paying 2.5%) and a Regular Saver Bond (2%).

Some allow couples to open two joint accounts with each partner the first-named on a regular saver plus personal accounts. Some savers have over £50,000 in these accounts, earning hundreds of pounds of extra interest a year.

Opening multiple high-interest current accounts is another option. Some have reportedly opened four current accounts with Nationwide to pocket the 5% it offers for a year on balances of up to £2,500 (although you need to fund each account with £1,000 a month).

If you can't be bothered with the hassle of multiple accounts, then fixed-rate deposits (in which you can deposit much larger sums) also offer higher rates. These range from 2% on one-year saving bonds to 3%-plus for five years or more. They are only worth considering if you do not need to access your cash early withdrawals are heavily penalised or not allowed. And the risk is that these guaranteed returns will look far less competitive when interest rates rise.

If you think rates won't rise for a while, a short-term fix may be worthwhile. The best two-year rate of 2.35% (FirstSave bank) offers a three-quarter point premium to the top easy-access rate of 1.6%. If easy-access returns stayed at 1.6% for the next year and hit 2.35% for the second year, savers would still be about 0.75% better off overall with the fixed rate.

Remember there may be better deals among smaller, less well-known institutions still covered by the Financial Services Compensation Scheme. Credit union My Community Bank has launched market-leading one and three-year fixed deals at 2.15% and 2.75%, compared with bank and building society best-buys of 1.95% and 2.65%, according to Moneyfacts. However, these rates are only available on balances of up to £15,000.

Be ready to move quickly when a better offer comes along. Some deals are so heavily subscribed that they are soon withdrawn.

The best homes for your cash

Source: Moneyfacts.co.uk and Mycommunitybanks.co.uk (9/12/13)